Thursday, June 15, 2017

Ok but why make that specific choice?

I guess I'm going to have to read this book to understand it better but what I was hoping to get from this story was a clearer understanding of what caused SBA to emphasize fast food franchises over healthier food retail in poor, minority dominated neighborhoods. The answer suggested here is that it was just The Market at work.
But why were fast-food franchisees so frequently the recipients of these SBA loans, rather than grocery stores or independent restaurants? One is that profit margins for fast-food can be as high as 6 percent, compared with 1 percent for grocery stores, as Jou writes. Grocery stores also often require significantly more square footage to operate space that can be hard to come by in a densely populated area. In 2009, for example, Subway franchisees received $27.7 million in SBA loans from the federal government, whereas all the combined grocery stores in the U.S. only received $4.1 million, Jou writes.
Is that all it is, though? Or are there other factors relating to, for example, the outsized influence of fast food companies on policy via their pressure groups. In any case, it's another episode of The Market not always making the best choices for us.

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